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Daimler is working with its biggest investor to start ride-hailing and car-sharing services in China, taking on industry leader Didi Chuxing on its home turf, according to people familiar with the matter.

The German manufacturer is in talks with Li’s Zhejiang Geely in setting up a 50-50 joint venture to offer the services, said one of the people, who asked not to be named as the plan is private. The discussions haven’t been finalised, the people said. Spokespersons for Stuttgart-based Daimler and Geely, based in Hangzhou, declined to comment.

The services would be a concrete step into cooperation between billionaire Li Shufu’s Geely Group and Daimler, deepening a relationship that started with Li acquiring almost 10% of the German company early this year. Li has said that the investment forms the basis for partnerships in an era where traditional manufacturers can no longer go it alone against new entrants with fresh technology.

The fresh competition comes at a time when Chinese ride-hailing company Didi Chuxing is facing unprecedented regulatory scrutiny in China. Daimler is considering using cars from its electric-vehicle brand Denza, its joint venture with Warren Buffett-backed BYD, the people said.

Daimler, the world’s largest luxury-car maker, and rivals from Volkswagen to Toyota are seeking a foothold in the transport services that are changing the way consumers use vehicles. China, the world’s biggest auto market, may end its near-three-decade growth partly because consumers are moving from owning to sharing, according to analysts including Bill Russo, chief executive officer of Shanghai-based advisory firm Automobility.

At the Paris auto show last week, Daimler chief executive officer Dieter Zetsche described the talks with Geely over possible projects as “very constructive,” saying that they look “very promising so far”. He declined to specify which areas of collaboration have been discussed so far.

Geely has been steadily increasing its sales volume in China, and it now trails only Volkswagen and General Motors in its home market. The company already has a ride-hailing app called Caocao that offers service in 24 cities in China using 23 000 electric vehicles, according to its website.

Daimler also offers car-sharing in Europe and is working on a split into three separate units - cars, trucks and mobility services - as a generational shift in consumer preferences lessens the need to own a car.